United States

Delaware unclaimed property reform continues

State legislature passes another significant bill

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UPDATE:  On July 22, 2015, Gov. Jack Markell signed S.B. 141 into law. Unclaimed property holders are expected to benefit from a permanent extension of the secretary of state’s voluntary disclosure agreement (VDA) program and a reduced look-back period. Companies with unclaimed property that escheats to the state of Delaware should review their exposure and consider their participation in a VDA. 


On July 1, 2015, the Delaware legislature passed S.B. 141, which, if enacted, will make sweeping changes to Delaware's unclaimed property law, including setting limitations for new audit examinations, permanently extending the secretary of state's voluntary disclosure program, revising both the voluntary disclosure and audit look-back periods, and by reinstating Delaware's interest provision. S.B. 141 was introduced to the Delaware Senate on June 16, 2015, and moved very quickly through the legislative process. S.B. 141 is currently waiting to be signed into law by Gov. Jack Markell.

Limitations for new audit examinations

Effective July 1, 2015, the State Escheator will be precluded from initiating any new unclaimed property examinations unless (1) the holder has been notified in writing by the secretary of state that the holder may enter into an unclaimed property voluntary disclosure agreement (VDA); or (2) the holder does not comply with the requirements set forth in the VDA.

If a holder does not enter into the VDA program within 60 days of receiving an invitation to participate, S.B. 141 provides that the holder will be referred to the State Escheator for an audit examination.

Extension of VDA program

S.B. 141's proposed changes to the audit selection process noted above effectively removes the expiration of the VDA program administered by the secretary of state which is set to expire in 2016 and makes the VDA a permanent component of Delaware's unclaimed property program.

Limitation of look-back periods

If enacted, S.B. 141 would implement the following look-back periods for holders participating in the VDA:

  • Jan. 1, 1996, for any holder that entered into the VDA program on or before Sept. 30, 2014, and makes payment in full or enters into a payment plan no later than June 30, 2016.
  • Jan. 1, 1996, for any holder that entered into the VDA program after Sept. 30, 2014, and on or before Dec. 31, 2016, and enters a VDA and makes payment in full or enters into a payment plan within two years from the date the holder's intent to enter into the VDA was accepted by the secretary of state.
  • Jan. 1 of the year that is 19 years prior to the year in which the holder's intent to enter into the VDA was accepted by the secretary of state for those that entered on or after Jan. 1, 2017. The holder is required to make payment in full or enter into a payment plan within two years from the date the holder's intent to enter into the VDA was accepted by the secretary of state (the due date for entering into the VDA and making payment may be amended by the secretary of state).

S.B. 141 also amends the look-back period for pending and new audit examinations, as follows:

  • Pending audit examinations will have a look-back period to Jan. 1, 1986
  • Audits initiated between July 1, 2015, and Dec. 31, 2016, will have a look-back period to Jan, 1, 1991
  • Effective Jan, 1, 2017, any audits initiated will have a look-back period of 22 years prior to the report year for which the State Escheator provides written notice of examination

Reinstatement of interest assessment

S.B. 141 also reinstates the interest assessment on unremitted unclaimed property which was eliminated in June 2014 by S.B. 228 (see Delaware may extend unclaimed property voluntary disclosure deadlines ). The interest assessment would be levied at 0.5 percent per month on outstanding unpaid amounts of unclaimed property amounts for any late-filed unclaimed property reported and remitted on or after March 1, 2016. The interest is capped at 25 percent of the unpaid amount. Prior to June 2014, the total interest could not have exceeded 50 percent of the unpaid amount.

Takeaways

In June 2014, Senate Concurrent Resolution No. 59 was passed by the Delaware General Assembly, creating an Unclaimed Property Task Force to inquire into, examine, study and make findings and recommendations to improve the fairness and compliance in Delaware's unclaimed property program. The first of the Task Force's recommendations to improve the fairness and transparency of the state's unclaimed property program were presented in S.B. 11 that was signed into law in January 2015 (see Delaware enacts significant unclaimed property legislation ). S.B. 141 further addresses the recommendations of the Task Force, showing the state's continued commitment to carefully considering and implementing the Task Force's recommendations.

Once enacted, S.B. 141 is expected to further increase the element of fairness and transparency to Delaware's unclaimed property program. The permanent extension of the secretary of state's VDA program and the reduced look-back period will greatly benefit holders moving towards compliance with Delaware's unclaimed property laws.

 

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